ECO SEM - 1

Q.1 in the case of a normal good, an increase in consumers incomes would shi the

A. demand curve Inward

B. supply curve inward
C. supply curve outward
D. demand curve outward

Q.2 Rhonda sells a house she has owned for 15 years. To Make it more marketable, she buys
carpe ng and has it professionally installed, and buys wallpaper that her daughter hangs. Which
items would be Included in this year's GDP?

A. the sale price of the house

B. the sale price of the house, carpe ng, and wallpaper and the installa on fee for the carpet
C. the sale price of the house, carpe ng, and wallpaper, the installa on fee for the carpet, and the
opportunity cost of Rhonda's daughter's me
D. the sale price of the wallpaper and carpet cost along with the installa on fee for the carpet

Q.3 Demand curve faced by Nuclear plant (a monopoly) shall be __________ and for a wholesaler in
flower market it will be__________

A. Inelas c, perfectly elas c

B. elas c, perfectly elas c
C. perfectly elas c, inelas c
D. perfectly inelas c, perfectly elas c

Q.4 Which of the following statement regarding the basic economic problem of scarcity is correct?

A. The problem only exists in countries that are not highly industrialized.
B. The problem is likely to disappear as produc on increases.
C. The problem will disappear with the improvement in technology.
D. The problem will exist as long as resources are available in limited amounts.

Q.5 The demand curve faced by a firm will be more elas c if

A. the fewer number of compe ng firms

B. more differen ated the product
C. more the subs tutes for its product
D. the greater the firm's ability to control price

Q.6 A market situa on in which a rela vely large number of producers offer similar but differen ated
products
A. Oligopolis c
B. Monopolis c Compe on
C. Perfect Compe on
D. Monopoly
Q.7 The reason for interdependence in oligopoly is___

A. High cost of switching over to other firms' products.

B. difference in response of other firms with price increase or decrease by a single firm
C. Low cost of switching over to other firms' products.
D. Similar product being sold by few firms

Q.8 in economics the central problem is

A. Consump on
B. Scarcity
C. Produc on
D. Money

Q.9 Firms in oligopoly know through their experience that price war benefits only__

A. Producers
B. Consumers
C. Stakeholders
D. Creditors

Q.10 Which one of the following statements about circular-flow diagram in na onal income
accoun ng is NOT CORRECT?
A. Savings as leakage have an injec on in form of corresponding Investment
B. Taxes as leakage have an injec on in form of corresponding Transfer Payments
C. Exports as leakage have an injec on in form of corresponding Imports
D. Imports as leakage have an injec on in form of corresponding Exports

Q.11 Observe the two statements and select the CORRECT op on Statement a; An increase in the
price of burger, other things constant, increases the opportunity cost of burger. Statement b; Because
of higher opportunity cost of burger consumers will reduce demand for other goods and increase the
quan ty demanded of burger.

A. Both statement a and statement b are correct and statement b is the correct explana on of
statement a
B. Both statement A and statement B are correct. But statement B is not the correct explana on of
statement A
C. Statement A is correct, but statement B is not correct.
D. Statement A is not correct, but statement B is correct.
Q.12 GDP does not include the

A. Increase in business inventories in the period

B. expenditures by government for newly produced
goods and services in a given period
C. value of all transac ons in the economy during a given period
D. value of final output during a given period

Q.13 For perfectly compe ve firms, the rela onship between the market price (P), average revenue
(AR), and marginal revenue (MR) will be

A. P = AR = MR
B. P > AR = MR
C. P = AR > MR
D. P = AR < MR

Q.14 The buying and selling of government securi es by central bank is known as______

A. Open market opera ons.

B. Statutory liquidity ra o
C. Cash reserve ra o
D. Repo rate

Q.15 If the low GDP growth rate of India is a ributed to the country's ineffec ve monetary policy
then we should observe that the country's money supply

A. and interest rates had increased.

B. and interest rates had decreased.
C. had increased and interest rates had decreased.
D. had decreased and interest rates had increased.

Q.16 The firm a ains equilibrium at a point where the cost is ___ to the isoquant

A. Non Linear
B. Linear
C. Non tangen al
D. Tangent

Q.17 it the IMT administra on raises the tui on fees of our students in order to increase revenue, it
will
A. not be successful if the demand curve slopes downward
B. be successful if demand is elas c
C. be successful if demand is inelas c
D. be successful if supply is elas c

Q.18 The problem with the marginal concept is that

A. Changes in variables may not be in bulk.

B. Changes in variables may not be in single unit.
C. Ou low and inflow of resources may not be equal.
D. Ou low and inflow of resources may not be simultaneous.
Q.19 Which one of the following is true about the MC
curve?
A. It intersects the ATC curve at its minimum, but it does not intersect the AVC curve at its
minimum.
B. It intersects the AVC curve at its minimum, but it does not intersect the ATC curve at its minimum.
C. It intersects both the ATC and the AVC curves at their minimum point.
D. It intersects both the ATC and the AFC curves at their minimums.

Q.20 Statement A Money Income is simply the number of rupees received per period. Statement &
Change in price level keeps the money income constant but may increase or decrease the real
income.
A. Both statement A and statement B are correct.
B. Both statement A and statement B are false.
C. Statement A is correct but statement B is not correct.
D. Statement A is not correct but statement B is correct.

Q.21 if Joe says that nothing comes close to a Pepsi, his demand for Pepsi is likely to be

A. rela vely price elas c

B. rela vely income elas c
C. rela vely price inelas c
D. unit elas c

Q.22 Nega ve elas city cross price elas city between any two commodi es implies that they are:

A. Complements
B. Inferior goods
C. Subs tute goods
D. Luxuries

Q.23 The formula of cross price-elas city is

A. % change in Dx/% change in Py

B. % change in Dx/% change in Px
C. % change in Dy/% change in Py
D. None of these

Q.24 A Sec ons 21 becomes a price leader because

A. It has the highest market share

B. It has be er industry intelligence and can preempt and interpret its external environment in an
effec ve manner.
C. It is a firm which has the highest growth in the industry.
D. It is the low cost player
Q.25 if the manager of a theatre plan to raise cket prices to increase the revenue then they must
believe that demand is
A. elas c
B. inelas c
C. unit elas c
D. perfectly elas c

Q.26 it a firm is a price taker, its marginal revenue is

A. Equal to market price

B. Less than market price
C. Greater than market price
D. A mul ple of market price that may be either greater than or less than one.

Q.27 What do monopolis c compe on, pure monopoly, and perfect compe on have in common?

A. free entry
B. long-run economic profits
C. price taking
D. the rule of profit maximiza on

Q.28 Fiscal policy is a regula on of the

A. the government's a tude to taxa on.

B. the ac ons of the central bank in controlling the money supply.
C. the government's intermediaries.
D. spending and taxa on policies used by the government to influence the economy.

Q.29 There are mul ple models of pricing behavior in oligopolis c markets because

A. the products are not iden cal in terms of quality. Image, loca on
B. firms could earn profit in the long run unlike other markets
C. price has a direct impact on profit for a firm in oligopoly
D. it is difficult to predict how rival firms will react to any pricing decision

Q.30 A large reduc on in the price of a similar product by firm in monopolis c compe on would
lead to
A. No effect on customers
B. A rac ng a small number of customers from rivals.
C. A rac ng all customers from rivals.
D. A rac ng large customers from rivals.

Q.31 Demand for fashion Items is governed by effect

A. Brand
B. Subs tu on effect
C. Income effect
D. Demonstra on effect.
Q.32 Which is the best method of compu ng Na onal income?

A. Product method
B. Income method.
C. Expenditure method.
D. Combina on of all these methods.

Q.33 Products in a product group are ____ subs tutes of each other.
A. Imperfect
B. Rela ve
C. Close
D. Perfect

Q.34 Which of the following is NOT a cause of infla on?

A. Increase in demand for goods/products and services.

B. Increase in cost of raw materials.
C. Increase in demand for luxury products and services.
D. Increase in supply of money.

Q.35 Which of the following statements of price elas ci es is NOT CORRECT? c the same when the
price is high or low
A. The demand for product X will be price elas c if there are the numerous subs tutes of the
product X
B. The demand for product X will be price elas c if it is a luxury item
C. The demand for product X will be price elas c if propor onately more quan ty is sold with a fall
in price
D. The demand for product X will be price elas c if propor onately less quan ty is sold with a fall in
price

Q.36 An cipated infla on

A. allows us to eliminate the problems associated with unemployment.

B. causes more problems than unan cipated infla on.
C. causes fewer problems than unan cipated infla on.
D. is easy to predict for economists.

Q.37 Coefficient of elas city is nega ve because.

A. Price and quan ty move in the same direc on

B. Consumers some mes buy nega ve units of commodity.
C. Law of demand holds
D. None of these

Q.38 During infla onary mes, which of the following is unlikely to happen?

A. People change their expecta ons about the infla on rate

B. Workers try to get increases in nominal wages.
C. People are willing to lend money for longer periods.
D. Rela ve price changes become harder to recognize.
Q.39 MC is equal to AC when AC is

A. Minimum
B. Maximum
C. Zero
D. One

Q.40 The income effect of an increase in the price of potatoes (an interior good) is a(n)

A. decrease in the demand for potatoes

B. decrease in the quan ty demanded of potatoes
C. increase in the demand for potatoes
D. increase in the quan ty demanded of potatoes
Q.41 The base year for a price index is the year

A. in which prices are lowest

B. in which prices are highest
C. that serves as a reference point
D. in which prices were stable

Q.42 All of the following are tools of fiscal policy except one Which is the excep on?

A. taxes
B. transfer payments
C. interest rates
D. government purchases of services

Q.43 Which one of the following ac ons will not increase GDP?

A. Bears prowl suburban areas, overturning garbage

cans so the city hires more sanita on workers to clean up.
B. Vandals spray paint all over brick buildings, increasing business for paint removal services.
C. An installer of an automobile tyre punctures the car's tyres parked near his neighbourhood.
D. A consumer has a tune-up done on his pick-up truck at the local garage.

Q.44 A firm opera ng under condi ons of perfect compe on can

A. Determine the price of its product

B. Determine only the quan ty of output it plans to supply.
C. Promote the sales through effec ve adver sement.
D. Capture the market by decreasing price of the product/service.

Q.45 As wants are unlimited but resources are scarce

A. only the rich get everything they want

B. choices must be made
C. there will be more services produced than goods
D. people search for spiritual fulfillment rather than material fulfilment
Q.46 Statement A Firms in monopolis c compe on are not producing at minimum average cost.
Statement a Firms in monopolis c compe on have excess capacity

A. Only statement A is true

B. Only statement B is true
C. Both statement A and statement B are true
D. Both statement A and statement B are false

Q.47 A characteris c of monopolis c compe on is

A. Adver sing and selling cost

B. High barriers to entry and exit.
C. A single seller with no compe on.
D. Few sellers with unique products

Q.48 which of the following statements related to fiscal deficit is NOT CORRECT?

A. Fiscal deficit denotes the level of market borrowings of the government

B. High fiscal deficit is always harmful for the country
C. High fiscal deficit can be controlled by a decrease in public expenditure
D. High fiscal deficit can be controlled by a rise in taxa on

Q.49 Which of the following could be true of perfect compe on but not of monopoly?

A. The government licenses produc on of the good to a few firms

B. The government grants a patent for the good.
C. A firm can earn economic profit in the long run.
D. There are no barriers to entry.

Q.50 Which of the following is true regarding Gross Domes c Product?

A. It can only be measured from the flow of total spending

B. It can only be measured from the flow of total income in the econorny.
C. It can be measured either from total spending or total expenditure.
D. It is calculated by compu ng total spending and total income; the larger of the two figures is
counted as GDP.

Q.51 In short fun

A. Labour is assumed to be variable

B. Both labour and capital are variable
C. Both labour and capital fixed
D. None of these

Q.52 The value of intermediate goods that are sold is

A. Not added to GDP

B. Added to GDP if they were produced in a previous year.
C. Added to GDP if they were produced and sold in the current year.
D. Added to GDP unless they are sold at a loss.
Q.53 An example of an uncontrollable resource that contributes to diseconomies of scale for a
movie theater is

A. concession stand staff

B. public roads congested with traffic
C. volume discounts from movie distributors
D. a single lobby in the theatre.

Q.54 if the market demand curve is given by Qd=15-8P and the market supply curve Qs = 2P find the
equilibrium price

A. 2.5
B. 3.5
C. 4.5
D. 1.5

Q.55 FOR non-price discrimina ng monopolist, an economic profit is maximized in the short run at a
140 Marginal revenue at that output level is

A. equal to Rs. 140

B. greater than Rs. 140
C. less than Rs. 140
D. less than marginal cost

Q.56 Fixed cost is also called as____

A. Sunk cost
B. Overhead cost
C. Supplementary
D. All of these

Q.57 On a graph of produc on costs, the ver cal distance between the fixed cost curve and the total
cost curve at a specific quan ty represents

A. variable cost
B. average variable cost
C. average total cost
D. average fixed cost

Q.58 Which of the following can increase real GDP per person?

A. a decrease in popula on growth

B. foreign investment from abroad
C. an increase in GDP of the country
D. all of these
Q.59 Giffen good

A.Displays direct price-demand rela onship

B. Is an inferior good.
C. Is an excep on of law of demand.
D. All of these

Q.60 Which is the best method of compu ng Na onal income?

A. Product method.
B. Income method.
C. Expenditure method.
D. Combina on of all these methods.

Q.61 The immediate effect on CDP of Ibrahim's purchase of a government bond is

A. a decrease in consump on because Ibrahirn has less money to spend

B. an increase in government spending
C. an increase in investment
D. non-existent, since no real goods and services have been produced

Q.62 If the price of a haircut (a normal good) increases, other things constant, the

A. demand for haircuts increases

B. demand for haircuts decreases
C. quan ty demanded of haircuts decreases
D. quan ty demanded of haircuts increases

Q.63 An increase in a person's real wage necessarily means

A. a lower nominal wage

B. a lower nominal wage a er payment of taxes
C. greater purchasing power
D. a higher nominal wage

Q.64 If the income elas city for product X is posi ve but less than one then it is a

A. superior product and a luxury

B. inferior product
C. superior product and a necessity
D. veblen product

Q.65 if a perfectly compe ve firm's marginal revenue is

A. the next unit sold will earn the firm less than Rs.35 in revenue
B. the next unit sold will earn the firm more than Rs.35 in revenue
C. the next unit sold will earn no more revenue
D. its average revenue is Rs. 35